Summary: Infrastructure contributed 1.3 percentage points to Tanzania's annual per capital GDP growth during the 2000s. If the country's infrastructure endowment were improved to the level of the African leader, Mauritius, annual per capita growth rates could increase by 3.4 percent. Tanzania has made great progress in reforming its trunk roads, improving the quality of the road network. The country has also seen significant gains in ICT networks, and has one of the most competitive domestic air transport sectors in Africa. The power sector poses Tanzania's most serious infrastructure challenge. Despite significant improvements in pricing and operational performance in recent years, inefficiency still absorbs about 1.4 percent of GDP. Moreover, due to heavy reliance on hydro-power the sector remains vulnerable to climate variability. The port of Dar es Salaam also suffers from performance problems as rapid traffic growth has increasingly exposed deficiencies in storage and access to the port. Poor access to safe water is another challenge, exacerbated by poor budget execution in the sector. Tanzania would need to invest $2.4 billion annually for 10 years to meet its infrastructure targets. Spending at that level would absorb just over 20 percent of the country's GDP. Existing spending stands at $1.2 billion a year. Tanzania loses $0.5 billion each year to inefficiencies such as underpricing, undercollection of revenue, overstaffing, and lack of budget prioritization. But even if inefficiencies could be fully captured, an annual funding gap of $0.7 billion would remain. That gap could be shrunk to $0.4 billion if lower-cost technologies were adopted and if regional power trade could be further developed.